According to official data, exports from China, already the world’s largest exporter, increased by 3.6% in 2020.
Photographer: Qilai Shen / Bloomberg
Photographer: Qilai Shen / Bloomberg
China’s economic growth is accelerating just a year after its first coronavirus blockades, as its success in controlling Covid-19 allows it to increase its share of global trade and investment.
The world’s second-largest economy is expected to report Monday that gross domestic product rose 2.1 percent in 2020, the only major economy to have avoided a contraction, according to a Bloomberg survey of economists.
This should ensure that its share of the world economy grows at the fastest pace of this century. According to the World Bank, world production fell 4.2% last year, bringing China’s share to 14.5% at 2010 dollar prices, two years ahead of schedule.
Full steam ahead
China’s share of the world economy is expected to grow at a faster pace
Source: IMF, World Bank, McKinsey & Company
And it’s not just a mistake that will be reversed once other major economies begin to recover as vaccines develop. Economists expect China’s GDP to expand 8.2% this year, and continue to outperform global counterparts, including the U.S.
Homi Kharas, deputy director for the Brookings Institution’s global economy and development program, said China is two years faster than it previously estimated.
After resisting President Donald Trump trade war, China is deepening economic ties in Asia and Europe and seeks domestic consumption to fuel its next phase of growth. President Xi Jinping said this week that “time and situation” were on the side of the country in a new year marked by national turmoil in the US
Read more: Some optimists say time passes by the Chinese side while turbulence prevents us
If its local virus control success continues, the pandemic could help China “consolidate its position in the global economy,” said Ka Zeng, director of Asian studies at the University of Arkansas. U.S. and European companies are likely to focus more on China because of the country’s “potential to be the only major source of growth in the post-pandemic world”.
The record jump in China’s share of world GDP was just one of many milestones in its economy last year:
- The economy converged with the United States at the fastest pace on record. According to the International Monetary Fund, China’s GDP was 71.4% of US levels in 2020, 4.2% more than the previous year
- The proportion of world trade increased as pandemic-related exports increased. According to official data, shipments from China, already the world’s leading exporter, increased by 3.6% in 2020. Total world trade probably decreased by 5.6%, according to estimates by the United Nations Trade and Development Agency UNCTAD
- China probably regained the title as the world’s top foreign investment destination, losing to the United States in 2015. Foreign investment in China reached $ 129.5 billion as of November 2020, slightly above the previous year. Globally, they are likely to have FDI flows fell 30-40% year-on-year in 2020, according to UNCTAD
- The Fortune Global 500 The list of the world’s largest revenue companies for the first time contained more companies based in China, including Hong Kong, than in the United States: 124 vs.. 121
- Box office receipts for year-round films surpassed the United States for the first time
- Sovereign debt was added to the FTSE Russell benchmark index, completing the country’s inclusion in the top three global bond indices. Foreign investors bought 1.1 trillion yuan ($ 170 billion) of Chinese bonds in 2020
China’s enhanced role in a post-pandemic world increases the urgency of the debate among the rest of the world on how to relate to Beijing. While the Trump administration has imposed tariffs and curbed access to key technologies, other countries have sought closer trade and investor ties.
Fifteen Asian countries, including China, signed the Regional Integral Economic Association pact in November, promising to reduce trade barriers in the region. In December, the European Union agreed on a global commitment investment agreement with China.
“Countries will have to deal with a bipolar world instead of a unipolar world,” said Bo Zhuang, China’s chief economist at TS Lombard.
What Bloomberg Economics says …
“Not only China’s growth, but also its growth model is important for the global economy. China continues to strive to move towards greater dependence on consumption for growth. For the rest of the world, China will increasingly become a consumer, in addition to the role it has played for a long time. “
– Chang Shu, Asia’s leading economist
Chinese leaders often downplay economic goals, such as their economic output surpassing that of Japan in 2010, for fear of scaring those already wary of their rise. Still, Beijing announced this year that it would try double GDP to 2020 levels by 2035, a goal that implies a move towards number one.
However, there is no guarantee that it will happen. China proved pessimistic wrong in 2020, but faces huge challenges a worsening of relations with the US that may limit access to technology, an over-reliance on debt-financed investment, and a rapidly aging population.
Read more: Here the speed of the Chinese economy is explained Until The USA
China’s role as a factory in the world improved last year as it expanded facial masks, medical supplies and equipment to work from home. While political leaders such as the Frenchman Emmanuel Macron have promised to make more at home after the pandemic, echoing American rhetoric about China’s “decoupling”: any change to diversify production will be gradual due to the high costs involved.
Stronger recovery
China’s economy has experienced another rebound this year, though others are stagnating
Source: National Bureau of Statistics, Bloomberg polls
Multinational companies have another reason to stay or even add to their investments in China: the fast-growing consumer market, which is already eclipsing the United States and Western Europe in some sectors.
China now accounts for a quarter of the world’s middle class, defined as the population that spends between $ 11 and $ 110 per person per day in 2011 in terms of purchasing power parity, a goal that “would not have been achieved in two years. more if Covid-19 hadn’t happened, ”Kharas of the Brookings Institution said.
Both General Motors Co. and Volkswagen AG continued to do so they sold more cars in China than in their domestic markets last year. Starbucks Corp. plans to open about 600 new stores this year, while Nike Inc. reported sales to China of $ 2 billion for the first time in the quarter ended November.
“We’ve seen wave after wave of the pandemic affect different markets,” Matthew Friend, Nike’s chief financial officer, said in a December investor call. “And really, the only market where we’ve seen a kind of continued trajectory when it comes to virus management has been China.”
– With the assistance of James Mayger
(Updates with details of bullet point bond purchases.)